Low rates will be a boost to homeowners but provide another hurdle to getting on the property ladder.

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Interest rates of around 4% and an average house price of £250,000 will be the new norm for the housing market in 2017, but it will be harder to save and borrowing conditions will be stricter, according to Legal & General.

The good news is that 2013 marks the end of the UK’s housing crisis and the start of a slow climb to a new normal.

Ben Thompson, managing director of Legal & General Mortgage Club, believes we are ‘coming to the end of the crisis’ and that homeowners have seen themselves placed in a strong position as mortgage rates have fallen, allowing them to pay off ‘secondary debt’ such as credit cards, loans and store cards.

Thompson said the property market won’t fully recover until 2017 at the earliest and there won’t be a return to the bad old days of 2007, but the introduction of a ‘new normal’.

House prices

For homeowners who have experienced a fall in their property’s value, and may even have strayed into negative equity, the good news is that house prices will surpass their 2007 peak but the rises will be gradual.

Between 1997 and 2007 house prices grew 11.4% on average until they hit an average house price peak of £227,000. Although Thompson predicted house prices will remain broadly flat in 2013 they will start to edge up and after 2017 will grow at a rate of 4.1% a year for the next decade, according to research by L&G.

That is not to say that all the growth in the housing market will happen after 2017. The research estimates that average house will be worth £254,000 in 2017, 11.9% higher than the £227,000 peak in 2007.

Mortgage availability

The pre-crunch mortgage frenzy, where banks handed out mortgages fervently and with few restrictions, won’t be repeated.

‘In 2007 gross lending was £363 billion but fell to £135 billion in 2010,’ said Thompson. ‘It is now on the rise again and the Council of Mortgage Lenders is predicting [gross lending] of £156 billion for this year. The industry has been through a rough time but now the sun is coming out again.’

The number of mortgage approvals in 2017 is expected to be 674,000 in 2017, far below the 2006 peak of 1.25 million but homes are set to become more affordable as disposable income catches up with house price appreciation.

Stricter borrowing conditions coupled with a reduction in the number of homes being built over the next four years will mean that the number of people renting instead of buying a home will increase. In 2007, a total of 67% of adults owned their home but the L&G research shows this will fall to 57% in 2017.

Of course, the tightening of lending criteria means it will be tough for first-time buyers with a small deposit. First-time buyers will be expected to have a deposit of 15% in order to purchase their own home.

"Ben Thompson, managing director of Legal & General Mortgage Club, believes we are ‘coming to the end of the crisis’" . Given that he has a vested interest in selling mortgages on what basis should I believe someone who is only interested in talking up the market. I have listened to similar projections from the Halifax and nationwide for years.